Your Guide to ACH Legal Payments
By Morgan Martinez
Law firms can only generate profits in one way—by collecting payments. Yet, according to our 2021 Legal Industry Report, more than 70% of surveyed lawyers report that they struggle to receive money from client bills. This can affect your cash flow and bottom line, ultimately stifling firm growth. So, how can you increase your law firm’s collection rate and help clients pay faster?
Automated clearing house (ACH) payments provide an easier way for clients to pay online. In this article, we explain everything you need to know about ACH legal payments, including the following.
- What is an ACH payment
- Types of ACH transactions
- Benefits of ACH payments for lawyers and clients
- Potential risks
- How to build a secure, efficient financial ecosystem
- How the ACH payment method compares to others, such as checks, credit cards, and wire transfers
What is an ACH Payment?
An ACH transfer is an electronic transaction between U.S. banks that processes through the ACH Network. Banks, financial institutions, government entities, businesses (including law firms), and individual consumers use the ACH Network to send and receive money securely online.
Types of ACH Transfers
There are two types of ACH transactions: direct deposits and direct payments.
1. ACH Direct Deposits
An ACH direct deposit is an electronic transaction where a consumer receives money from a business or government entity. One of the most common examples is an employee receiving paychecks directly into their bank account from their employer.
2. ACH Payments
The reverse of a direct deposit, an ACH direct payment is a digital transaction where a consumer sends money. ACH payments are so ubiquitous that you may have experienced one without knowing. For example, if you’ve paid bills online with money from your bank account or used an app like Venmo to pay friends, you’ve issued an ACH payment.
In fact, organizations and individual consumers made more than 29 billion ACH Network payments totaling nearly $73 trillion in 2021, according to NACHA, the group that governs the ACH Network.
Why Your Firm Should Accept ACH Payments
ACH payments could help your law firm better serve clients and increase collection rate and speed. Below are a few ways you can implement ACH legal payments.
- Accept digital payments instead of physical checks
- Offer payment plans and accept fees (such as retainers) and payments in installments
- Automate recurring expenses, such as rent, utilities, and team member salaries
At this point, you might be thinking: That sounds great, but implementing ACH payments seems like a hassle. Is it worth it? Let’s discuss the various benefits of ACH payments for lawyers and clients.
How ACH Payments Benefit Lawyers
1. Less Administrative Work
Physical checks can cause administrative headaches. Your law firm must wait for checks to arrive in the mail, process them, and then sit around until the money clears. If a client makes a mistake on the check or doesn’t pay the full amount, your team has to follow up and ask for a new check. ACH payments eliminate this archaic, slow process and require much less administrative work—so you can take advantage of every billable minute.
2. Faster Payments
Waiting for a check to arrive, process, and clear can take weeks. Standard ACH transfers, meanwhile, typically take three to five business days. Same Day and Next Day ACH transfers are also available, with Same Day ACH growing rapidly in popularity since its inception in 2016 (according to NACHA).
With any ACH payment method, you’ll likely get paid faster than physical checks. Law firms that accept online payments receive invoice payments 32% faster than law firms that don’t, according to anonymized data from MyCase users. (Learn more in our Benchmark Report, Part Two: How Lawyers Get Paid.)
3. Better Collection Rates
Law firm profitability starts with offering clients several payment options. If clients can address invoices more conveniently, they’re more likely to pay—which means better cash flow and greater revenue.
Law firms that used MyCase for online payments in 2021 saw a nearly 10% increase in collections compared to those that didn’t use the MyCase online payments platform—as shared in our Benchmark Report.
4. Affordable Payment Processing
ACH payments can be very affordable. In fact, sometimes banks offer free ACH transfers for certain types of transactions. Typical ACH fees are as follows, according to Merchant Maverick (a reviews site specializing in financial services and software).
- Flat fee per transaction: $0.20 – $1.50
- Percentage fee per transaction: 0.5% – 1.5%
- Monthly fee: $5 – $30
- Batch fee: Less than $1 per batch
5. Easier Reconciliation
Businesses may enjoy an easier accounting process with ACH legal payments. Every payment is recorded electronically; there’s no need to connect invoices with check numbers.
How ACH Payments Benefit Clients
1. Better Client Experience
Imagine your clients’ day-to-day lives. They probably autopay bills online, use credit cards to purchase goods on e-commerce sites like Amazon, or stream television on-demand with Netflix. In other words, they’re used to convenient and instant transactions. ACH payments fit right in—they provide your clients with a more straightforward, familiar way to pay.
The ACH network is highly regulated by the Federal Reserve Bank and the Electronic Fund Transfer Act. Additionally, NACHA’s Operating Rules govern all ACH transactions conducted within the ACH Network. This extensive oversight makes ACH secure.
What Are the Risks?
No payment method is foolproof—networks can be hacked, and paper checks can be stolen or forged. However, pairing ACH payments with secure legal invoicing and payment software can create a very safe payment ecosystem.
For instance, MyCase’s legal invoicing software enables you to send invoices directly to clients through the secure Client Portal. On the back end, you can see when clients take action, such as viewing an invoice or making a payment. MyCase also lets you see your firm’s finances with the click of a mouse, so you’re always up-to-date on accounts receivables.
How Does ACH Compare to Other Payment Methods?
For many modern law firms, paper checks are going out of style. With the ease of digital transactions, many clients no longer want to drive to your office or send payments slowly through the mail. Compared to physical checks, ACH payments are:
- More convenient for law firms and clients
- More secure—account numbers remain confidential when payments route through the ACH Network, unlike paper checks that openly display account numbers.
- More environmentally-friendly
ACH legal payments can be more affordable than credit card transactions. For example, according to Bankrate, credit card fees typically range from a 1.5% to 3.5% charge per transaction. Compare those figures to average ACH transfer fees of 0.5% to 1.5% per transaction. By accepting more ACH transactions, your law firm may save significant money in the long run.
However, with ACH payments, your law firm won’t immediately know if a client doesn’t have enough funds to fulfill the transaction. Credit cards provide immediate feedback on fund availability.
Like credit card transactions, wire transfers can be more expensive than ACH payments. Banks typically charge a wire transfer fee ranging from $15 to $50 per transaction, according to Bankrate. Additionally, ACH payments are more regulated, so lawyers and clients may rest easier knowing that their money is secure.
On the other hand, wire transfers could be better for law firms that conduct international business, as ACH is only available between U.S. banks. Also, wire transfers may process more quickly than ACH transactions, depending on the ACH payment method (Same Day, Next Day, or standard ACH).
Get Paid More Easily With MyCase and LawPay
For law firms around the country, the benefits of ACH legal payments are clear. And with MyCase and LawPay (our sister company under AffiniPay), you can receive payments faster and build a more profitable firm—no matter how you get paid.
MyCase legal invoicing software helps you automate invoice creation and send bills via a secure Client Portal. It can even send automated invoice reminders so you can focus on billable time rather than administrative tasks.
When clients are ready to pay, transactions can be securely processed through LawPay, the legal payments software of choice for more than 50,000 lawyers. Most importantly, MyCase and LawPay ensure that your firm accepts payments in compliance with ABA and IOLTA guidelines.